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Mary Catherine wrote down the Ridge, it held a number of other
parcels, including Minnechaug, that had also been adversely
affected by the downturn in the real estate market. None of
these other properties were written down in 1989.
The Minnechaug Writedown
The FDIC required Bay Bank, Mary Catherine's mortgage lender
for Minnechaug, to obtain an appraisal of Minnechaug, at a time
when its value was then less than the amount that Mary Catherine
owed to Bay Bank.5 Bay Bank informed Mary Catherine that the
bank had to write down Minnechaug for regulatory purposes and
that the bank expected that the reduction in value would be
reflected in Mary Catherine's financial statements.
On January 25, 1991, Mary Catherine commissioned an
appraisal of Minnechaug from Howard A. Jubrey, Jr., of Appraisal
Associates, Inc. Jubrey arrived at a value, as of January 22,
1991, of $2,500,000 for approved but unimproved land. The
parties have stipulated that the fair market value of Minnechaug
on December 31, 1990, was $2,500,000. Immediately prior to
December 31, 1990, Mary Catherine’s adjusted basis in Minnechaug
was $7,187,700. Mary Catherine wrote down Minnechaug on its 1990
financial statements to its fair market value and claimed a loss
on its 1990 Federal income tax return in the amount of
5 The record does not disclose the date or the results of
Bay Bank's appraisal of Minnechaug. The record is also very thin
with respect to what transpired between the banks and the FDIC.
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